Oct 16 Japanese Prime Minister Yoshihiko Noda
plans a new round of economic stimulus by the end of next month
as the country has entered a lull, Kyodo News reported, quoting
sources close to the prime minister.
The steps are expected to include measures to curb
deflation, ease strength in the yen, expand earthquake
reconstruction work and relax regulations on businesses, the
news agency reported.
Noda will hold an extraordinary cabinet meeting Wednesday to
instruct his ministers to map out the plan, Kyodo said.
The Japanese government has downgraded its outlook for the
economy three times in a row in its monthly assessment, saying
last week there was a weak tone.
The Nikkei newspaper said the Japanese government was
considering funding the new stimulus with 910 billion yen ($11.5
billion) set aside in the 2012 budget for economic emergencies
and the revitalization of regional economies.
If opposition parties cooperated then Noda would propose an
extra budget that could total several trillion yen, the
In the foreign exchange market, the yen did not react to the
news, but speculation of more easing from the Bank of Japan had
the dollar hitting 78.95 earlier in the global session,
its highest level against the yen since Sept. 19.
In afternoon New York trade, the dollar traded at 78.86, up
0.3 percent on the day, according to Reuters data.
"It is not clear what he (Prime Minister Noda) is speaking
about," said Daniel Katzive, currency strategist at Credit
Suisse in New York. "He could be talking about more measures to
support exports or the effects of yen appreciation on
"I think that is why you do not have much reaction because
the market does not see the government as likely to be coming
out with a really massive counter measure to yen strength," he
Japanese policymakers are concerned that exports may not
pick up in time to keep Japan's economy on track for a recovery
as Europe's sovereign debt crisis hits global trade and delays a
pickup in markets like China.
Of particular concern is the impact on exports of a strong
yen, which is trading not far from a seven-month high of 77.11
to the dollar it hit in mid-September.
The International Monetary Fund trimmed its growth forecasts
for Japan after factory output fell to a 15-month low in August
on sagging sales to top export market China and worsening
There are also fears that the Japanese economy may be hurt
by a territorial dispute with China over a group of small
islands, which has sparked anti-Japan protests in China and
calls for boycotts of Japanese goods.
Noda has decided to take stimulus measures in order to
prevent the economy from free-falling and secure his prized
policy goal of increasing the 5 percent consumption tax rate
from April 2014, Kyodo quoted the sources as saying.
Using funds earmarked in the 2012 budget would not need
parliamentary approval but raising bonds to fund it would, the
To do so, the government would need to win support from
major opposition parties, which the Nikkei said would reinforce
opposition calls for an election.